Mortgage lending criteria

Key Principles

Maximum Loan to Value (LTV)

• The maximum LTV for interest-only lending is 75%.
• For Sale of Mortgaged Property (SOMP) repayment plans, the maximum interest-only amount may be restricted by the minimum equity requirements.
• For part interest-only / part capital and interest repayment, lending is available up to 85% LTV, provided any lending above the interest-only limit is on a capital and interest repayment basis.

Credit Score Requirement

Customers must achieve a sufficient credit score with us to proceed.

Income Requirements

• The minimum sole or joint main earned income is £50,000.
• Certain repayment plans have additional income requirements. Where applicable, these are detailed within the relevant repayment plan section.
• Only basic salary, overtime, bonus, commission and latest years self-employed income can be used to meet the minimum income requirement across all repayment plans.

Maximum Age

• The mortgage term must not extend beyond the customer's 70th birthday.
• Some repayment plans may have additional retirement-related restrictions.

Repayment Plan Requirements

The customer must have an acceptable repayment plan in place for any:

• New borrowing
• Term reductions or extensions
• Transfer of mortgage property (TOMP)

The repayment plan must:

• Cover the full interest-only balance
• Be on our list of acceptable repayment plans
• Have a term that ensures sufficient funds will be available by the end of the mortgage term
• Be based on a UK or sterling-denominated asset or investment
• Be owned by one or more mortgage applicants who will occupy the mortgaged property
• Not rely on an asset or investment where a non-applicant has a legal or beneficial interest

Examples

• A parent who is named on the mortgage solely to support affordability, but will not occupy the property, cannot provide the repayment plan.
• A second property owned jointly with a brother, sister or any other person who is not a mortgage applicant cannot be used as a repayment plan.

Combining Repayment Plans

Customers can use more than one acceptable repayment plan to cover their interest-only balance.

However:

• Sale of Mortgaged Property (SOMP) cannot be combined with any other repayment plan.

The following repayment plans can be combined and used together to meet the minimum £50,000 repayment plan value requirement:

• Stocks and Shares ISAs
• Unit Trusts
• Investment Bonds
• Stocks and Shares

Evidence Requirements

• Evidence of the repayment plan must be provided before a mortgage offer can be issued.
• Use the interest only calculator to assess the maximum interest-only lending available under each repayment plan.

Acceptable Repayment Plans

The following repayment plans are acceptable:

• Bonus
• Cash Savings
• Endowment
• Pension
• Sale of Mortgaged Property (SOMP)
• Sale of Other Residential Property
• Stocks and Shares / Investments

Other than sale of mortgaged property customers may use more than one repayment plan to cover the total interest-only balance.

Bonus

Eligibility

The customer must meet one of the following income requirements:

• Sole income of at least £75,000.
• Joint income where one applicant earns at least £75,000.
• Combined joint income of at least £100,000.

Amount Available30% × the bonus figure × the mortgage term

The repayment plan value is calculated as:

The bonus figure is calculated in line with our standard bonus income assessment requirements. Where bonus is paid annually, this will be the average bonus received over the last 2 years.

Important

Where bonus is used as an interest-only repayment plan:

• Bonus income for any applicant cannot also be used within affordability.
• Customers are expected to make periodic lump sum reductions.
• Standard ERC rules apply where overpayment allowances are exceeded.

Evidence Requirements

Cash Savings

Eligibility

The customer must meet one of the following income requirements:

• Sole income of at least £75,000.
• Joint income where one applicant earns at least £75,000.
• Combined joint income of at least £100,000.

Repayment Plan Value

The customer must hold a minimum of £50,000 in cash savings for at least 3 consecutive months.

Savings can be held across multiple personal accounts. Where multiple accounts are used, the combined balance must have remained at or above £50,000 throughout the previous 3 months.

Up to 100% of the available savings balance can be used to support interest-only lending.

Where balances fluctuate during the previous 3 months, the lowest balance will be used when assessing the repayment plan value.

If the savings are also being used as the deposit, sufficient funds must remain to support both the deposit and the repayment plan.

NS&I Premium Bonds are treated as savings and can be used as a repayment plan.

Only personal savings accounts are acceptable. Business accounts cannot be used, even where the customer is the sole owner of the business.

Evidence Requirements

Customers can provide:

• A statement dated within the last month; and
• A previous statement showing the funds have been held for at least 3 consecutive months.

For NS&I Premium Bonds, an annual statement can be accepted as evidence.

Endowment

Eligibility

The customer must meet one of the following income requirements:

• Sole income of at least £50,000.
• Combined joint income of at least £50,000.

Repayment Plan Value

Up to 100% of the projected maturity value can be used.

The projected value is based on using the middle % or the lower projection if there are 2 growth rates.

Evidence Requirements

Provide:

• The latest endowment projection statement dated within the last 12 months.
• With profits Endowment current sum assured and total regular bonus statement dated within 12 months. We are unable to accept the surrender value or guaranteed minimum value.

Pension

Eligibility

The customer must meet one of the following income requirements:

• Sole income of at least £50,000.
• Combined joint income of at least £50,000.

Repayment Plan Value

Where a pension has a current or projected fund value of at least £400,000, up to 15% of the fund value can be used to support interest-only lending.

Where a pension provides a current or projected lump sum value, up to 60% of the lump sum value can be used instead.

Where both a fund value and lump sum value are provided, the lump sum value will be used.

The maximum repayment plan value that can be used is £160,965.

the repayment plan value will be capped at £160,965 where:

• 15% of the pension fund value exceeds £160,965 or
• 60% of the pension lump sum value exceeds £160,965

For pensions that do not show a current or projected fund value, such as final salary schemes:

• A minimum current or projected lump sum value of £100,000 is required.
• Up to 60% of the lump sum value can be used.

This limit reflects the current Lump Sum Allowance (LSA) of £268,275, which is the maximum tax-free lump sum available across an individual's pensions. The maximum repayment plan value is therefore restricted to 60% of this amount.

Where a statement provides projected values:

• Use the middle projection where three growth rates are shown.
• Use the lower projection where two growth rates are shown.

Pensions belonging to the same applicant can be combined to meet the minimum fund value or lump sum requirements.

Pensions belonging to different applicants cannot be combined.

Acceptable Pension Types

The following pension arrangements are acceptable:

• Personal pensions
• Occupational pensions
• Final salary pensions
• Self-Invested Personal Pensions (SIPPs)

Transfer value letters issued by a pension provider are also acceptable and will be treated as a current value. Up to 15% of the transfer value can be used where applicable.

Evidence Requirements

Provide the latest pension statement dated within the last 12 months.

Transfer value letters issued by the pension provider can also be accepted.

Important Points

Pension contributions must be keyed under Total Monthly Payment Towards Investment Vehicles and will be included within the affordability assessment.

Customers must understand the importance of maintaining pension contributions throughout the mortgage term.

If a customer has already taken a pension lump sum or is currently drawing an income from the pension, the pension can no longer be used as an acceptable repayment vehicle.

Where a lump sum has been withdrawn and transferred into another pension arrangement, the pension may still be acceptable subject to review by the Central Interest Only Team and evidence of the transfer being provided.

The interest-only term must not extend beyond the lower of the customer's Anticipated Retirement Age or Maximum Working Age of 70.

Sale of Mortgaged Property (SOMP)

Eligibility

The customer must meet one of the following income requirements:

• Sole income of at least £75,000.
• Joint income where one applicant earns at least £75,000.
• Combined joint income of at least £100,000.

Applications using this repayment plan are assessed against a higher credit score requirement than other acceptable repayment plans.

Repayment Plan Value

The available repayment plan value is based on the equity available within the mortgaged property.

The maximum interest-only LTV is 75%.

Equity Assessment

The equity available will be calculated using the valuation or property assessment completed as part of the application.

Any existing borrowing secured against the property, together with any new borrowing to be secured against the property, must be declared and will reduce the equity available.

For main residences, a minimum equity requirement applies:

Use the interest only calculator to support any calculations.

Where part of the lending is on a repayment basis:

• The minimum equity requirement is assessed at the end of the mortgage term. Any capital and interest repayment lending can therefore be disregarded when calculating the minimum equity requirement.
• Part interest-only and part capital and interest repayment lending is available up to 85% LTV.
• The capital and interest repayment term cannot exceed the interest-only term.

For properties on the Second Home Scheme, the minimum equity requirement does not apply.

Important Points

• Any existing or proposed secured borrowing will reduce the equity available.
• The customer must understand that the property will need to be sold at the end of the mortgage term to repay the interest-only balance.

Sale of Other Residential Property

Eligibility

The customer must meet one of the following income requirements:

• Sole income of at least £50,000.
• Combined joint income of at least £50,000.

Repayment Plan Value

The property must:

• Be located within the UK.
• Have equity greater than £50,000.
• Be owned only by the mortgage applicant(s).

Up to 80% of the available equity can be used to support interest-only lending.

Each property used as a repayment plan must individually meet the minimum equity requirement.

Evidence Requirements

Provide:

• A completed Interest only - other residential property form.
• The latest mortgage statement where the lender is not part of Lloyds Banking Group.

Where the property has not yet been purchased, provide:

• Property details.
• Solicitor confirmation of ownership.
• Details of any borrowing to be secured against the property.

Important Points

• Ownership must match the mortgage applicant(s).
• We will assess the property's value using an Automated Valuation Model (AVM).
• If the property value exceeds £1,000,000, the Interest Only team will instruct a valuation through e.surv at no cost to the customer. The customer should be advised that access to the property may be required.
• Where an AVM is insufficient, the customer may obtain a RICS valuation at their own expense.

Stocks and Shares, ISAs and Investments

Eligibility

The customer must meet one of the following income requirements:

• Sole income of at least £50,000.
• Combined joint income of at least £50,000.

Repayment Plan Value

The investment must:

• Be UK based.
• Be held in sterling.
• Have a minimum value of £50,000.

Up to 80% of the current investment value can be used to support interest-only lending.

The following can be combined to meet the minimum £50,000 repayment plan value requirement:

• Stocks and Shares ISA
• Unit Trusts
• Investment Bonds
• Stocks and Shares

Acceptable Investments

• FTSE quoted Stocks and Shares
• Stocks and Shares ISAs
• Unit Trusts
• Open Ended Investment Companies (OEICs)
• Investment Bonds (UK)

Evidence Requirements

The customer will need to provide:

• Share certificates or
• Nominee account statements; or
• Confirmation from a recognised stockbroker showing holdings and valuations.

Where using an ISA, provide:

• The latest ISA statement dated within the last 12 months.

General Interest Only Rules

Unacceptable Repayment Plans

The following cannot be used:

• Sale of commercial property
• Sale of non-property assets
• Inheritance

Customer Responsibilities

Customers are responsible for ensuring their repayment plan remains on track.

We may request evidence of the repayment plan during the mortgage term.

If we are not satisfied that the plan remains sufficient, the customer may be required to convert some or all of the mortgage to capital and interest repayment.

Existing Halifax Customers Moving Home

Where an existing customer does not meet current interest-only policy, we may consider allowing interest-only lending up to the level already held, provided the mortgage term is not increasing.

The property tenure should be established before a full application is submitted, as it may affect whether the property is acceptable.

Where the customer is unsure of the tenure, they should check with the estate agent, solicitor, Land Registry or relevant property records.

Leasehold and Freehold

A leasehold property is owned for the remaining term of a lease. The freeholder owns the building and land, and ownership of the property returns to the freeholder when the lease expires.

A freehold property includes ownership of the building and the land on which it stands.

Flats are generally leasehold, although the customer may also own a share of the freehold or the freehold of the whole building. The applicable requirements depend on the ownership structure.

Leasehold Properties

Minimum Lease Term

A leasehold property is acceptable where at least 70 years remain on the lease at the date of application.

A property with fewer than 70 years remaining may be considered where the lease is being extended beyond 70 years as part of a:

• Purchase
• Remortgage
• Further Advance

The lease extension must complete on or before completion of the mortgage. A special condition will be added to the mortgage offer confirming that the offer is made on this basis.

Lease terms below 70 years that are not being extended are only acceptable on certain central London estates and are subject to separate criteria and worth discussing with us on a case-by-case basis.

Where the remaining lease term is only slightly above 70 years, the customer should be made aware that the property may be difficult to mortgage or sell in future unless the lease is extended.

Absent Landlords

Where a leasehold flat has an absent landlord and the lease needs to be extended, the application cannot proceed. This is because there may be no freeholder available to extend the lease or enforce the lease covenants.

Extending a Lease Beyond 70 Years

For an eligible purchase, remortgage or Further Advance:

1. Key the full application using the current lease details.
2. When instructing the valuation, add the following note to the valuers’ comments screen: “Lease extension to XXX years”.
3. The valuer will record the present-condition value as £0 and provide the expected value based on the proposed extended lease.
4. A final inspection will be arranged and the lending and LTV will be based on the improved valuation.
5. The application will be referred to Underwriters so the relevant special condition can be added before the mortgage offer is issued.

Ground Rent, Service Charges and Factor Fees

Ground rent, service charges and Scottish factor fees that are or will be paid by the customer must be keyed as commitments and included in the affordability assessment.

Flats and Ownership Structures

Where the property is a flat, ownership arrangements can affect how the application is processed and how our mortgage is registered.

The following table sets out the requirements for each acceptable tenure structure.

Tenure Types and Requirements

The following requirements apply to flats and converted buildings. For converted buildings and purpose-built developments containing no more than four units, any lease should already be in place and must not be created as part of the mortgage application.

Freehold Reversion Leases

Freehold Reversion leases are also known as:

• Tyneside leases
• Cross-Referred leases
• Mirror leases

These arrangements should be keyed as Leasehold Flats.

Underleases

An underlease is acceptable security.

Apply the same requirements as for a lease created directly from the freehold. The underlease must meet our standard leasehold requirements and the applicable requirements in the UK Finance Mortgage Lenders’ Handbook.

Flying Freeholds

A flying freehold exists where part of a property extends over another property or another person’s land.

Flying freeholds are generally not acceptable. However, consideration may be given where only a limited part of the property is affected, for example where one room partly extends over the adjoining property.

The valuer will confirm whether the individual property is acceptable within the Property Risk Assessment report.

Commonhold Properties

Commonhold properties are not acceptable.

Under commonhold ownership, the customer owns the freehold of the individual property, while a Commonhold Association owns and manages the common parts of the building.

Scotland

All Scottish properties, including flats, should be keyed as Ownership Interest.

In the Property screen:

• Key the anticipated completion date as the Entry Date (Scotland).
• Only enter an amount under Annual Chief Rent or Feu Duty where a payment applies.
• Leave the field blank where no payment applies.

Northern Ireland

Flats in Northern Ireland are generally leasehold.

Fee Farm Grants may also be encountered. These are historic arrangements with elements of both freehold and leasehold tenure. New Fee Farm Grants could not be created after 1997, and the leasehold element may be bought out.

Conveyancer Requirements

The Conveyancer is responsible for confirming that:

• The lease meets our standard requirements.
• The titles and ownership arrangements meet our requirements.
• Any management company arrangements are acceptable.
• Our mortgage is registered against the correct title or titles.

Applications from customers with a minimum one year's self-employed trading history are not automatically accepted but will be individually assessed by an underwriter. A member of our underwriting team will consider the income earned before becoming self-employed, previous experience in the same industry will be considered where applicable, income evidenced during the first year of trading and projected future income.

The following evidence may be requested to support the assessment, where applicable:

• A covering note outlining the applicant's line of work, how long they have worked in the industry and their experience before becoming self-employed.
• Evidence of previous income, such as P60s from before becoming self-employed
• A full 12 months' trading history, evidenced by a Tax Calculation (SA302) or finalised company accounts (finalised profit and loss account for a sole trader)
• A projection letter from the accountant, addressed to Halifax or the customer. Including details of how the projection has been calculated, such as contracts in place, invoices issued and income already received
• The latest 3 months' business and personal bank statements
• Where possible, the projection and supporting bank statements should cover a period after the first trading year has ended. This helps demonstrate that income levels are continuing beyond the period already within the accounts

Giving as much supporting evidence as possible upfront helps demonstrate that future income is likely to continue and gives the application the best opportunity of being approved. The underwriter will consider the application as a whole, not just the income but also the overall risk profile and loan to value (LTV).  

A change of status for example a sole trader to limited company does not reset the timeframe for assessment. So, the original start date is entered and not the date the company changed status.

Key Principles

We use affordability to determine the maximum loan available.

• If the loan requested exceeds the maximum loan available from our affordability assessment, the loan amount must be reduced or the application cannot proceed.
• Our affordability calculator provides an indication of the maximum loan available.
• No credit search is carried out when using the affordability calculator, so the result may change once a Decision in Principle (DIP) is completed.
• Loan to Income (LTI) caps apply in addition to affordability.
• LTI caps are maximum limits only. The maximum loan available may be lower once affordability, credit score, credit profile, loan to value (LTV) and product criteria have been assessed.

Refer to our Affordability Calculator for an indication of the maximum loan available.

Standard Loan to Income (LTI) Caps

First-Time Buyer Boost

Eligible applications may qualify for an LTI of up to 5.50x income.

First-Time Buyer Boost LTI

Eligibility

• Purchase applications only.
• At least one applicant must be a first-time buyer.
• Total application income must be £40,000 or more.
• Maximum 90% LTV.
• Not available on Shared Equity or Shared Ownership schemes.

Important Points

• Some applications may be restricted to a maximum LTI of 5.00x due to the overall credit profile.
• In some cases, the credit score achieved may result in standard LTIs being applied instead.

£5,000 Deposit Mortgage

Additional LTI Rules

Affordable Housing Schemes

For Shared Equity and Shared Ownership applications, the maximum LTI is 4.49x.

Self-Employed Applicants

There are no separate LTI caps for self-employed applicants. Standard LTIs apply.

Like for Like Remortgages

For like for like remortgages, an enhanced LTI of up to 5.50x may be available where the standard LTI would otherwise be lower, subject to:

• No additional borrowing.
• A maximum LTV of 75%.
• Credit score.

For Shared Equity and Shared Ownership remortgages, the maximum LTI remains 4.49x.

Credit Score and Credit Profile

The maximum LTI available may be reduced based on the credit score achieved and overall credit profile.

Depending on the application, the maximum LTI may be restricted to:

• 5.00x instead of 5.50x.
• 4.49x instead of a higher standard LTI.
• 4.00x where income exceeds £75,000, the loan exceeds £500,000 and a reduced LTI is applied.

Product-Specific Restrictions

A different maximum LTI may apply depending on the product selected.

Affordability Adjustments

When assessing affordability we may:

• Use the property's EPC rating to reflect estimated energy costs.
• Apply a deduction for future financial planning commitments.
• Apply an affordability adjustment for some contractors to reflect likely business expenses.
• Continue to include some credit commitments even where the customer intends to repay them.

If these adjustments reduce the maximum loan available, the loan amount must be reduced to proceed.

EPC Ratings and Affordability

A property's Energy Performance Certificate (EPC) rating is used within our affordability assessment.

• Properties with an EPC rating of A or B may benefit from a small increase in the maximum loan available.
• Properties with an EPC rating of F or G may see a small decrease in the maximum loan available.
• There is no change to the maximum loan available where the property has an EPC rating of C, D or E, or where the EPC is unknown.

Interest Only Applications

For interest only lending, affordability includes the cost of the repayment vehicle.

Where applicable, details of any repayment vehicle premiums must be entered at both DIP and full application stage.

Future Changes to Income and Expenditure

Our affordability assessment takes account of future changes to income and expenditure where applicable.

Where the Maximum Loan Available is Lower Than Requested

If the maximum loan available is lower than the amount requested:

• The loan amount must normally be reduced.
• It may be possible to extend the mortgage term, subject to policy. This may include lending into retirement where the relevant evidence and retirement income requirements are met.
• If income cannot be evidenced at the declared level, the loan amount must be reduced accordingly.

Before reducing the loan amount, check that the application has been keyed correctly and that all credit commitments match the latest credit bureau information. Differences between the information keyed and the credit bureau may affect the maximum lending available.

Exceptions

We may only consider lending above the maximum loan available from our affordability assessment where:

• The customer is an existing Halifax mortgage customer and there is no increase in loan amount or loan to value (LTV) compared with their current mortgage.
• Additional income is available, can be evidenced in line with policy requirements, and is expected to continue for the life of the mortgage.

Accuracy of Keying

All commitments must be keyed accurately to ensure a correct affordability assessment.

Advisers must:

• Ensure they are familiar with the commitment types that must be keyed and how each commitment is treated.
• Discuss all commitments and outgoings with the customer.
• Include any commitments recorded with a credit reference agency, including mobile phone contracts.
• Only select 'None' where the customer has no commitments.

Advisers should consider asking the customer to provide a copy of their credit report to help identify all commitments.

Business Commitments and Personal Guarantees

Commitments held in the name of a Limited Company owned by the customer do not need to be keyed, as they are the responsibility of the Limited Company rather than the customer.

Personal guarantees provided for mortgages or loans to family members or friends must be keyed as a commitment, as these are separate from the customer's business interests.

For guidance on commitments where a self-employed customer has personal liability, or where a Company Director has provided a personal guarantee, please refer to the Self-Employed Business Commitments section.

Commitments to be Repaid on or Before Completion

Commitments that will be repaid on or before completion must still be keyed.

Select 'Yes' for 'Intend to Repay on Completion'.

This includes the existing mortgage on a remortgage application.

Selecting 'Intend to Repay on Completion'

Only select 'Yes' where:

• The customer confirms they intend to repay the commitment on or before completion.
• The proposed repayment appears reasonable given the remaining balance and term of the commitment.
• You are satisfied the customer has sufficient means to repay the commitment, for example from savings or regular income.

Commitments Marked as Being Repaid

Where commitments are marked as being repaid, the mortgage offer will include a condition confirming that:

• The affordability assessment has been based on the customer's declared intention to repay the commitment.
• The commitment must be repaid on or before completion.

Recently Repaid Commitments

If a commitment has recently been repaid but may still appear on information held by a credit reference agency, the commitment must still be keyed and marked as 'Yes' for 'Intend to Repay on Completion'.

Partial Repayment of a Commitment

Where only part of a commitment will be repaid:

• Key one commitment as being repaid in full.
• Key a second commitment with the remaining balance.
• This tells the system how it will look from completion onwards.

Loans Above 85% LTV

For all loans above 85% loan to value (LTV), and any other applications where we consider it prudent, commitments may still be treated as ongoing within the affordability assessment, even where the customer has declared an intention to repay them on or before completion.

The loan amount must remain affordable on this basis.

Payslips

Check whether a customer's payslips include deductions that should be keyed as commitments.

Examples include:

• Student loans
• Childcare vouchers
• Salary sacrifice loan schemes, such as vehicle finance

Payslip Deductions That Do Not Need to Be Keyed

The following financial payslip commitments do not need to be keyed:

• Beneficial loans provided by an employer solely for a travel season ticket or Cycle to Work scheme.
• Employer savings schemes (for example, Sharesave), provided the customer could stop the contributions if required.
• Additional pension contributions provided the customer could stop the contributions if required.

Keying hints

• Where a commitment does not have a definitive end date, enter a reasonable estimated end date.
• For commitments with a monthly payment but no total outstanding balance, enter the balance as an annual amount (12 × monthly payment).
• Where a property is owned jointly with someone who is not named on the application, key the full monthly mortgage payment, not just the customer's share.
• For the definition of child and adult financial dependants, see the Dependants section.
• For guidance on answering adverse credit application questions, please see Adverse Credit.

Commitment types to be keyed:
 

Loans

Cards & other credit

Family

Property

Other

Who is a Contractor?

A customer is considered a contractor where their income is derived from a contract rather than permanent employment.

Examples include:

• Self-employed contractors who pay their own tax
• Contractors employed through an umbrella company
• Fixed-term or short-term contract workers
• Agency workers

Treating a Contractor as Self-Employed

A contractor should be treated as self-employed where:

• They pay their own tax or
• They have more than one contract and income from more than one contract is required for affordability or
• They operate through a Limited Company and employ other contractors.

Income must be evidenced using the standard self-employed income requirements.

Treating a Contractor as Employed

A contractor can be treated as employed where:

• Tax is deducted by the company they work for, or
• Tax is deducted by an umbrella company, or
• They pay their own tax or class themselves as self-employed and earn more than £500 per day, or
• They pay their own tax or class themselves as self-employed and earn more than £75,000 per annum, calculated over a 46-week year.

IT Contractors

An IT contractor can be treated as employed regardless of income level, even where they pay their own tax or consider themselves self-employed.

Exceptions

An IT contractor must be treated as self-employed where:

• They have more than one contract and income from more than one contract is required for affordability or
• They operate through a Limited Company and employ other contractors.

Continuous Employment Requirements

To be treated as employed, the customer must have either:

• At least 12 months' continuous employment, with a minimum of 6 months remaining on their current contract; or
• At least 2 years' continuous service in the same type of employment.

Are gaps in employment allowed for contractors?

Gaps between contracts do not automatically prevent an application from proceeding.

When assessing income sustainability, consider:

• The reason for the gap
• The duration of the gap
• The customer's previous experience in the same field

Example:

A four-week gap due to holiday or sickness would normally be considered reasonable.

Contractor Income Assessment

Contractors Who Pay Their Own Tax or Are Paid Through an Umbrella Company (Including IR35)

Evidence Requirements

Provide:

• A copy of the latest contract; and
• The latest month's payslip(s)

Where payslips are not issued, normally where applicants invoice, then please provide a copy of the latest bank statement showing the income received.

Income Calculation

Use the lower of:

• The gross value of the contract; or
• The income calculated from payslips or bank statements.

Gross Contract Value

Calculate contract income using:

Daily rate × 5 days × 46 weeks

or

Hourly rate × 7 hours × 5 days × 46 weeks

Where the contract specifies lower hours, days or weeks, use the contracted figures instead.

Payslip or Bank Statement Income

Annualise the gross income received and calculate it using a 46-week year.

Examples:

• Monthly gross pay × 12 ÷ 52 × 46
• Average gross weekly pay × 46

Keying Income

The lower of the two calculated figures must be keyed and used within the affordability assessment.

Umbrella Company Payslips

Umbrella company payslips may split income into several elements, including:

• Basic salary
• Commission
• Additional taxable income
• Holiday pay

Where the contract confirms payment via a daily or hourly rate, the income can be keyed as basic salary and does not need to be split into separate income types.

Limited Companies and LLPs

Where a contractor operates through a Limited Company or Limited Liability Partnership (LLP), the income evidence must be provided by the contracting employer and not the customer's own business.

Multiple Shareholders

Where a contractor operates through a Limited Company:

• If another shareholder is also named on the mortgage application, the contract income must only be keyed once.
• No additional income from the same contract can be keyed for the other shareholder/customer (s).
• If another shareholder is not named on the mortgage application, only the customer's share of the income can be used.

Example:

A customer with a 50% shareholding can use 50% of the contract income.

Fixed-Term, Short-Term and Agency Workers

Evidence Requirements

Provide:

• The latest month's payslip(s); or
• The latest 3 months' payslips where income varies or additional income is being used.

Income Calculation

Annualise the gross income received and calculate it using a 46-week year.

Example:

Monthly gross pay × 12 ÷ 52 × 46

Construction Industry Scheme (CIS) Contractors

Treating CIS Contractors as Employed

CIS contractors are generally treated as employed where tax is deducted at source.

Treating CIS Contractors as Self-Employed

A CIS contractor should be treated as self-employed where:

• They are responsible for all of their own tax, usually 20% is deducted at source or
• They have contracts with more than one company and income from both contracts is required for affordability.

Evidence Requirements

Provide:

• The latest 3 consecutive months' income evidence; and
• Matching bank statements.

Acceptable income evidence includes:

• Payslips
• Invoices
• Statements

Income evidence may be from the same or different contracts where the customer has recently changed employer.

The evidence must be issued by the company the customer works for and must not be self-billed.

Income Calculation

Calculate income using the average of the latest 3 months and annualise it using a 46-week year.

Payment periods with no income, or where supporting evidence cannot be provided, should be included in the calculation as £0.

Income Calculator

The Guide to keying employed income calculator can be used to support the calculation.

Junior and Locum Doctors

Income should be evidenced using payslips covering the latest 12 weeks and annualised using a 46-week year.

Applications can proceed where:

• At least 6 months' continuous employment can be established; and
• Confirmation of a remaining or future contract can be obtained.

Where confirmation of a future contract is unavailable, the application may still proceed where the standard contractor criteria can be met.

Associate Dentists

Associate Dentists are normally employed within NHS dental practices and paid according to units of dental activity (UDAs).

Income should be based on the actual attainable income after contractual deductions.

Example

• UDA contract value = £94,000
• NHS contract deduction = 50%

The customer's attainable income is £47,000.

This figure should then be annualised using a 46-week year £47,000 / 52 x 46 = £41,577) before being keyed.

Probationary Employment

Income can only be used where the probationary period forms part of a permanent employment contract.

Permanent Contract with Probationary Period

Where a customer has accepted a permanent role that includes a probationary period:

• Key the employment as Permanent.
• The income can be used within the affordability assessment.

Professional Sports People

Applications from Professional Sports People may be considered where either:

• At least 12 months' continuous employment can be established with a minimum of 6 months remaining on the contract; or
• At least 2 years' continuous service in the same type of employment can be established.

Careful consideration should be given to the customer's ability to maintain mortgage repayments as they approach the end of their career or if their career ends unexpectedly due to injury.

Unacceptable contracts

The following contract types are unacceptable and the income cannot be used for affordability purposes:

Probationary contracts

• Where the employer has the option to offer permanent employment at a later date.

Other unacceptable contract types

• Piecework
• Price work
• Seasonal contracts
• Temporary contracts

Treat as self-employed

If any of the following applies, a customer must be treated as self-employed:

• They own 25% or more of the business.
• They receive dividends or a share of the business's net profits as part of their income.
• Joint applicants with a combined 25% shareholding must both be treated as self-employed

Treat as employed

A customer can be treated as employed if they:

• own less than 25% of the business
• don’t receive dividends or a share of the business's net profits as part of their income.

In these cases, bank statements must be provided to support the payslips used for income verification.

Additional income verification requirements

Where a customer is paid by faster payment, an employment history document from HMRC is required to verify the income shown on the payslips and bank statements.

The employment history document can be:

• issued by HMRC by post
• downloaded from the HMRC website or the HMRC app.

Acceptable Applications

Non-sterling income can be used on all applications.

For Further Advances and Product Transfers, non-sterling income can be used even where it was not included on the original application.

There is no minimum income requirement for non-sterling income.  However, applications assessed under our Seafarers criteria are subject to separate income requirements. Please refer to the Seafarers section for details.

Acceptable Currencies

We currently accept income in the following currencies:

• US Dollar (USD)
• Euro (EUR)
• Australian Dollar (AUD)
• Indian Rupee (INR)
• Swiss Franc (CHF)

Only one non-sterling currency can be used on an application.

Sterling income and non-sterling income can be used together on the same application.

Acceptable Income Types

The following employed income types can be accepted in a non-sterling currency:

• Basic salary
• Bonus
• Overtime
• Commission

Non-sterling income cannot be used for any other income types.

Self-Employed Income

Non-sterling self-employed income is not acceptable.

The only exception is a partner of a Limited Liability Partnership (LLP), where the income is verified by a letter from the Finance Director.

Currency Conversion and Haircuts

Income must be keyed in the original currency and not as a GBP equivalent.

A currency dropdown field should be used when keying income.

Within the application system we will:

• Convert the income to GBP
• Apply a 20% haircut to basic income
• Apply a 10% haircut to bonus income

These reductions are applied to account for potential exchange rate fluctuations.

Exchange Rates

Our Mortgage Affordability Calculator uses current exchange rates.

When an application is submitted, the exchange rate used at Decision in Principle (DIP) stage will remain fixed for that application.

The maximum loan available will therefore not change due to future exchange rate movements.

Income Verification

Payslips

Where payslips show income in the original non-sterling currency, no additional evidence is required.

Where payslips only show the converted GBP amount, a Compensation Letter or Remuneration Statement must also be provided.

Invoices aren’t acceptable in lieu of payslips because they are not prepared by the employer.

Compensation Letter / Remuneration Statement Requirements

The document must show:

• Employer name
• Employee name
• Pay date
• Currency being paid
• Income type (for example salary or bonus)

The document must be:

• Issued directly by the employer
• Provided through the employer's online systems

Language Requirements

All payslips and supporting documents must be provided in English by the employer. Translated versions of the payslip, even if done by a professional are not acceptable.

UK Residency Requirements

All mortgage applicants must be UK residents.

This means the customer must have their primary address in the UK.

A correspondence address or a family member's address cannot be declared as a primary address where the customer lives outside the UK.

Primary Address

A customer may spend most of their time overseas but still have a primary address in the UK.

UK residency for mortgage purposes is not the same as tax residency.

There is no requirement for customers to be UK tax residents.

Definition of Non-Sterling Income

Non-sterling income is any income originally paid in a currency other than Pound Sterling.

This remains non-sterling income even where it is converted into GBP before being paid into a bank account.

The following are treated as Pound Sterling and are not considered non-sterling income:

• Jersey
• Guernsey
• Isle of Man
• Gibraltar
• Falkland Islands

Mortgage Documentation

Where non-sterling income is used:

• Additional wording will appear within the Mortgage Illustration.
• Customers will receive a post-completion letter if exchange rate movements reduce the value of the income by more than 20%.

Contractors with Non-Sterling Income

To use non-sterling income, a contractor must meet our standard employed contractor requirements.

Where contractor income is assessed against the £500 per day or £75,000 per annum thresholds, the equivalent non-sterling amounts are:

Evidence Requirements

The customer will need to provide a copy of them

• Contract and
• Bank statements or payslips showing income received.

Where bank statements only show the converted GBP amount, payslips or a Compensation Letter / Remuneration Statement must also be provided showing the original currency amount.

Self-Employed Customers with Overseas Income

Where a business is not UK-based, self-employed income cannot be used.

Where a business is UK-based:

• Standard self-employed verification requirements apply.
• Sterling income evidenced through SA302s and Tax Year Overviews can be used.
•  Any amount shown as "Foreign Income" on an SA302 must not be included.

Bonuses Paid in Different Currencies

Where bonus income has been received in different currencies over the last two years:

• Only the latest year's bonus can be used.
• The currency selected should be the currency of the latest bonus payment.
• The two-year average should be calculated using:
  • Latest year's bonus amount and
  • £0 for the previous year.

Frequently Asked Questions

Can non sterling income be accepted for seafarer contractors?

Yes. Please see seafarers’ criteria for full details.

Does income have to be paid into a UK bank account?

No. There is no requirement for income to be paid into a UK bank account.

The customer must still meet the UK residency requirements.

Do payslips need to show UK tax?

No. Payslips may show:

• UK tax
• Foreign tax
• No tax deductions

The customer must still meet the UK residency requirements.

Payslips

Payslips must show:

• Customer name
• Employer name
• Pay date
• Basic income
• Gross pay
• Net pay
• Any additional income being used within the affordability assessment

Handwritten Payslips

Are Handwritten payslips acceptable? Yes.

Handwritten payslips are acceptable where corresponding bank statements are provided showing the income paid by the employer.

Bank Statements

Bank Statement Requirements

Bank statements must show:

• Customer's full name, or initial and surname
• Account number

Internet Bank Statements

Internet bank statements must also show:

• Bank name or bank heading
• Web address

Benefit Award Letters

Benefit Award Letters must:

• Be dated within the last 12 months
• Show the customer's name
• Show the value of the benefit being received

Benefits received on behalf of another person, such as a dependant, cannot be used.

Employer References

Where required, employer contact details must be provided so we can request a reference directly from the employer.

The employer reference must:

• Be returned directly to us
• Be addressed to Halifax
• Be signed and dated
• Be completed by a named individual whose position is provided
• Have any amendments clearly marked and initialled

What format can the employer use?

The employer can either:

• Complete our employer reference form and provide company headed paper
• Provide the required information in their own format

What information must the reference include?

The reference must include:

• Employer name and address
• Employee name, address and contact number
• Employment start date and job title
• Contract status
• Income details, including basic salary and any additional income
• Mortgage application number

Send completed references to employmentreference@lloydsbanking.com

Fixed Income

Where basic income is the same each month, fortnight or week, only the latest income 

months evidence is required:

• Monthly paid: 1 payslip
• Fortnightly paid: 2 payslips
• Weekly paid: 4 payslips

Variable Income

The latest 3 months' income evidence is required where:

• basic income varies or
• variable income is being used within the affordability assessment.

Examples include:

• 3 monthly payslips
• 6 fortnightly payslips
• 12 weekly payslips

If one or more pay periods show no income, for example a week with £0 income. These periods can still be included within the averaging calculation where you are satisfied that the reason for the reduction is reasonable and the income remains sustainable.

Before using this income, you must be satisfied that the variation is plausible and the income remains sustainable.

An average should be used when assessing the income. 

A note must be added to explain the variation, for example:

The customer's basic pay varies due to the nature of their employment. Therefore, I am satisfied that the income remains sustainable.

Bonus and Commission Income

Calculating Bonus and Commission Income

For bonus or commission income paid less frequently than monthly, for example:

• Yearly
• Half yearly
• Quarterly

key the lower of:

• total income received during the last 12 months or
• the average income received over the last 2 years

All payslips showing this income for the latest 2 years are required.

Overtime, Bonus and Commission

For overtime, bonus or commission paid monthly, 4-weekly, fortnightly or weekly, provide payslips covering the latest 12 weeks.

For customers paid monthly, provide the latest 3 consecutive payslips.

Bonus or Commission received from previous employer 

commission and non-annual bonuses

• Only income received from the current employer can be used.
•  If commission or non-annual bonus income received in the previous year was from a previous employer, use £0 for that year when calculating the 2-year average.

Annual bonuses

An annual bonus received from a previous employer may be included where: 

• The latest annual bonus was paid by the current employer and
• The customer remains in the same line of work.

Missing Bonus Payments

Where bonus income was not received during one or more periods, or supporting payslips are unavailable, use £0 for the missing period when calculating the income.

Examples include:

• A recent change of employment
• No bonus being paid in a particular year
• Missing payslip evidence for a bonus payment period

This applies only where you are satisfied that the income remains sustainable.

Bonus Paid in Shares

Bonus income paid in shares can only be used where there is evidence that the shares were immediately cashed in.

Key Principles

• Earned income can be used up to the earlier of the customer's anticipated retirement age or the applicable Maximum Working Age.
• The Maximum Working Age is normally 75, although a lower age of 70 applies in some cases.
• Where the customer's stated retirement age exceeds the applicable Maximum Working Age, the Maximum Working Age must be used.
• Where the mortgage term extends beyond the earlier of the customer's anticipated retirement age or the applicable Maximum Working Age, the application will be treated as lending into retirement and future retirement income must be verified. See Lending into Retirement for more information.

When is the Maximum Working Age 70?

A Maximum Working Age of 70 applies to:

• Remortgage applications with any capital raising or additional borrowing.
• Applications with any element of interest-only lending.
• Some purchase and like for like remortgage applications where a lower Maximum Working Age is applied due to the application's internal credit score.

When is the Maximum Working Age 75?

A Maximum Working Age of 75 applies to:

• Purchase applications.
• Like for like remortgage applications.
• Product Transfer applications.
• Further Advance applications.

However, some purchase and like for like remortgage applications may be restricted to a Maximum Working Age of 70 due to the application's internal credit score.

Applications Exceeding the Maximum Working Age

Where a mortgage term extends beyond the applicable Maximum Working Age, a Decision in Principle (DIP) message will advise that:

• Anticipated Retirement Income must be keyed or
• The mortgage term must be reduced.

Customers Intending to Work Beyond State Pension Age

Customers who state they will retire at age 75 are not treated as lending into retirement, provided the mortgage term ends before age 75.

Brokers should discuss:

• Whether continuing to work beyond State Pension Age is realistic given the customer's occupation.
• The customer's plans to continue working until their stated retirement age.
• The potential impact if their circumstances change before retirement.

These discussions should be documented where appropriate.

Customer Working Age Form

A Customer Working Age Form is required whenever the mortgage term extends beyond age 70 for any applicant.

The form:

• Must be completed by all applicants, regardless of their age.
• Confirms the customer has considered the implications of the mortgage term selected.
• Confirms the customer believes they can continue working until the age stated.

The completed form must be uploaded before an offer can be issued.

• Employed - Current employment details collected
• Self Employed - 2 years history requested however, where the business has been trading for less than 2 years eg 1 year self employed and so self employed income is not available for 2 years, we will still consider these applications. You must record all full relevant years' income accurately on the mortgage application.

Our standard treatment for self-employed Limited Company Director income is to use the total of salary/remuneration and dividends drawn (as shown on Tax Calculations), so company net profit is not accepted as standard income. However, where affordability requires the customer's share of company net profit, applications may be referred to an underwriter for individual assessment.

To be considered we will require the following:

• Minimum two years' finalised accounts
• An accountant's projection with their confirmation the net profit amount that could have been drawn from the business without adversely impacting its operation
• 3 months' business and personal bank statements
• The applicant needs to be the majority shareholder
• The company should have increasing, or at least stable, turnover, net profit and expenditure

When assessing whether company net profit can be used, underwriters will consider the factors below collectively. These are not individual pass/fail requirements:

• Whether the business is well established and how long it has been trading. Evidence of a longer track record of net profit beyond the minimum 2 years strengthens the case.
• Evidence of consistent turnover, profitability and business costs. Increasing performance is preferred, but consistency is expected as a minimum.
• The nature of the business and whether company net profits are required for business operations. For example, profits not drawn primarily for tax efficiency may be viewed differently from profits required to fund stock purchases or ongoing operational costs.
• The proportion of income required from net profits. Reliance on a larger proportion of net profits is likely to increase the risk profile of the application overall.
• The applicant's experience within the industry, including their track record of operating at the income level being declared.
• The overall risk profile and loan to value (LTV)

Income paid by cash, cheque or giro is acceptable.

What evidence is required?

To verify the income, obtain bank statements covering the same period as the payslips being used for income verification.

When is an employer’s reference required?

An employer’s reference is required where:

• net pay shown on the payslips doesn’t match credits shown on the corresponding bank statements
• the customer does not pay all their income into a bank account.

Family businesses

An employer’s reference is not an acceptable form of income verification where the customer is employed by a family business.

In these circumstances, an employment history document from HMRC should be obtained to verify the income received and evidence the income shown on the payslips and bank statements.

The employment history document can be:

• issued by HMRC by post
• downloaded through the HMRC website or the HMRC app.

How should rental income be keyed?

Rental properties with mortgage commitments

Where a customer owns Buy to Let properties with mortgage commitments:

• Key all mortgage commitments as commitments with Buy to Let selected as the mortgage type.
• Key gross rental income from both Buy to Let and Consent to Let properties as Rental Income - from Buy to Let properties owned under Other Income. Do not use Rental Income - Consent to Let.
• Rental income will only be used to offset the Buy to Let mortgage payments.
• Excess rental income will not be included within the affordability calculation.

When can rental income be included in affordability calculations?

Rental income can only be included in affordability calculations where all rental properties owned by the customer are mortgage free. A customer cannot have a mixture of mortgaged and mortgage free rental properties. If any rental property has a mortgage secured against it, rental income from all rental properties is excluded from affordability calculations and can only be used to offset the associated Buy to Let mortgage commitments.

What evidence is required where rental income is included in affordability calculations?

• The customer must declare the income to HM Revenue & Customs.
• The customer must provide Tax Calculations and corresponding Tax Year Overviews.

How should rental income included in affordability be keyed?

• Key the net rental profit as Self Employed income.
• Key the income as a second job.
• Complete the Self Employed income section for each of the last two years, where applicable.

What evidence can be used where the property is already let?

Rental income can be evidenced using any of the following:

• Latest 3 months' consecutive bank statements showing rental income if amount received is the same each month.
• Current tenancy agreement signed by the landlord (or letting agent) and tenant.
• Letter from an accountant.
• Letter from a solicitor.
• Letter from a letting agent.
• A valuation report less than 6 months old where the Buy to Let property is already mortgaged or is being mortgaged with Lloyds Banking Group.

What must a letting agent letter include?

The letter must:

• Be on company headed paper.
• Contain the customer's name (initial and surname as a minimum).
• Confirm the rental income amount.
• Confirm the frequency of payment.
• Confirm that the rental income is still being received.
• Confirm the rental property address.
• Be signed and dated.

Statements of Account are not acceptable.

Are internet bank statements acceptable?

Yes, provided they clearly show:

• Customer name.
• Account number.
• Bank name or heading.
• Statement date.

What evidence can be used where the property is to be let?

Expected rental income can be evidenced by:

• A letter from a letting agent confirming the expected rental income.
• A letter from an accountant.
• A letter from a solicitor.

In all cases, ensure:

• The customer's name appears on the document.
• The document is on company headed paper.
• The document is signed and dated.
• The letting agent or estate agent exists.

What rental income is unacceptable?

The following rental income types are not acceptable:

• Rental income from properties let to family members or friends.
• Rental income from Airbnb properties.
• Rental income from holiday lets or properties being used as holiday lets.
• Rental income from commercial properties.
• Rental income received in non-sterling currency.

Employment Status Assessment

Income Types

When to treat a customer as Self-Employed

Treat the customer as self-employed if any of the following apply:

• They own 25% or more of a business.
• Joint applicants each hold shares and together own 25% or more of a business.
• They are a subcontractor deriving income from more than one contract.
• They are a partner in a business and receive income other than PAYE.
• They own a franchise.
• They receive PAYE salary and dividends from a Limited Company as part of their remuneration package.
• They are an LLP member receiving a share of profits.

Exception

A Limited Company Director with less than 25% shareholding may be treated as employed where:

• Only PAYE salary is needed to meet affordability and
• No dividends are being used.

Self-Employed Income Assessment

Income to Enter

Limited Company Directors

Where a Limited Company Director receives PAYE salary and dividends as part of their remuneration package, they must be treated as self-employed.

Multiple Businesses

Where the customer owns more than one business:

• Each business must be keyed separately.
• Income for each business must be obtained from the customer.
• The split should be entered against the relevant business and trading year.

Trading History Requirements

We normally require income details for the latest two full years of trading.

Applications can be considered where the business has traded for at least one full year.

Where trading history is less than two years, accounts are the preferred method of income verification and additional information may be requested.

Income Used for Affordability

The income used for affordability will be the lower of:

• The latest year's income; or
• The average income across the latest two years.

Changes in Business Structure

A change in business structure does not automatically require a new trading history.

Examples include:

• Sole Trader to Partnership.
• Partnership to Limited Company.
• Sole Trader to Limited Company.

Where the customer remains in the same line of business:

• Treat trading history as continuous.
• Use the original business start date.
• Do not use the date the business structure changed.

Example

A customer has been self-employed for four years in the same line of business. They traded as a sole trader for three years and six months before changing to a limited company six months ago.

In this scenario, key the current business status as Limited Company, but use the original business start date from four years ago. The date the business structure changed should not be used, as the trading history is treated as continuous.

For income assessment, use the previous year's sole trader net profit. As the business structure changed during the latest year, the income evidence will be split between sole trader and limited company income. In this example, combine six months of sole trader net profit with six months of director's salary and dividends from the limited company to calculate the latest year's income.

Evidence Requirements

Primary Evidence

Obtain documents in the following order:

1. Tax Calculations and corresponding Tax Year Overviews.
2. Finalised Business Accounts.

Business Bank Statements

Where requested, provide the latest three months' business bank statements.

Statements must cover the latest three full months, even if no income is shown.

Your customer must wait 72 hours after fully submitting their return until they can print their documents.

The following details must be visible on the online Tax Calculation:

• HMRC logo
• Unique Tax Reference (UTR)
• Customer's name
• Tax year (most recent no older than 18 months old), and the following wording:
• "This is a copy of information held on your official online SA tax account with HMRC", and
• "Submission is 100% complete."

Online tax assessments produced by accountants' commercial software (accompanied by corresponding Tax Year Overviews) are acceptable provided they show the following:

• Unique Tax Reference number
• Customer's name
• Tax Year (most recent no older than 18 months old).

The tax due figure on the Tax Calculation and Tax Year Overview will usually exactly match. If there is a difference in the tax figure we will consider these but may require updated documents.

Latest 2 Years Full Accounts – must be finalised and clearly show the net profit (for Sole Traders), share of net profit (for Partnerships) or salary & dividends (for Directors of Limited companies). Profit & Loss statements alone are not acceptable. Where the customer has been trading for less than 2 years, we require accounts for the full year of trading.

The year end on all documentation must be the most recent and must not be dated more than 18 months before the date of application.

In addition for self-employed incomes the latest 3 months' bank statements for the account which is used for business purposes may be required.

In cases where the customer has more than one job, we will consider the following when deciding whether or not to take the secondary income into account. Hours worked, are they sustainable? Are the roles/skills similar? What is the distance between the jobs and the customers home? How long has the customer been in both jobs? Is the salary consistent with the type of employment? And the number of days the customer works per week.

Once all of the above has been taken into account and deemed acceptable, we will use the appropriate percentage of the second job income and it will be treated as per the standard income policy.

Where a customer discloses a future change to their income or commitments that is known at the time of application, the change must be assessed and where applicable, included in the affordability assessment.

Future Changes to Income

Increase in Income

When a future increase in income that is known at the time of application is identified it can be included in the affordability assessment where:

• The increase is confirmed and
• The customer is willing and able to provide supporting evidence.

Examples include:

• New job
• Pay rise
• Promotion

For further information, see the New Job, Pay Rise and Promotion criteria.

Decrease in Income

Where a future decrease in income that is known at the time of application is identified, the reduced income must be keyed and used in the affordability assessment.

Examples include:

• Moving from full-time to part-time employment
• Redundancy notification
• Reduction in contractual hours
• Loss of state benefit income during the mortgage term

Advisers must discuss:

• How the reduction will affect the customer's finances overall
• How the customer intends to maintain mortgage repayments
• Whether the income remains sustainable for the mortgage term

Temporary Reduction in Income

Where a customer expects a temporary reduction in income, advisers must be satisfied that the income used within the affordability assessment remains sustainable and that the customer can maintain their mortgage repayments throughout the period of reduced income.

Examples include:

• Maternity leave
• Paternity leave
• Industrial action or strike action
•  Other temporary reductions in earnings

Future Changes to Commitments

Where a customer discloses a future commitment that is known at the time of application, the commitment must be keyed and included in the affordability assessment.

Examples include:

• A personal loan that has been agreed but has not yet started
• A new finance agreement
• Any other known future credit commitment

Sole Traders and Partnerships

Where a self-employed customer is a sole trader or partner, any business debt for which they are personally liable must be keyed as a commitment, regardless of whether repayments are made from a business account.

Limited Company Commitments

Commitments held in the name of a Limited Company owned by the customer do not need to be keyed as a commitment, as the debt is the responsibility of the Limited Company rather than the customer.

See Personal Guarantees below for guidance where the customer has provided a personal guarantee for business borrowing.

Personal Guarantees

Personal guarantees provided for business borrowing do not need to be keyed where the business is solely responsible for the debt and the customer is not making any repayments personally.

A personal guarantee for business borrowing must be keyed where the customer is personally making some or all the repayments.

Where a personal guarantee has been called upon, care should be taken as this may indicate that the business is experiencing financial difficulties.

Personal guarantees provided for mortgages or loans to family members or friends must always be keyed as a commitment, as these liabilities are separate from the customer's business interests.

Example 1

Director of a Limited Company with a personal guarantee for business borrowing.

The commitment only needs to be keyed if the Director is personally making some or all the repayments at the time of the mortgage application.

Example 2

Customer has a car loan in their own name and the repayments are being made through the business.

The commitment must be keyed, as the customer remains personally liable for the debt and it will show on their credit file.

If the credit score decision is Accept and the available lending meets the customer's borrowing requirement, no further action is required.

Where the application fails affordability and it can be clearly evidenced that:

• The repayments are made from the business account and
• The expense has been deducted before Profit After Tax or Net Profit is calculated

The case can be referred to an Underwriter for consideration of whether the commitment can be ignored from affordability.

New Employer

Where a customer has accepted a role with a new employer, the new income can be included in the affordability assessment where the customer is willing and able to provide supporting evidence.

The employment start date should be keyed as the date the application is submitted.

Current Employer

Where a customer has accepted a new role or a pay rise with their current employer, the increased income can be included in the affordability assessment where:

• The increased income is required for affordability; and
• The customer is willing and able to provide supporting evidence.

Examples include:

• Pay rise
• Promotion
• Change of role

Evidence Requirements

Evidence of the new income must be obtained.

Acceptable evidence includes:

• Employment contract
• Pay rise letter
• Promotion letter

The evidence provided must meet our acceptable document requirements.

Employer Contract / Letter

• Addressed to the customer when it’s a letter
• Employer’s name
• Customer’s name
• Job title (where applicable)
• Terms of the offer, signed and dated (electronic Signature is acceptable)
• Income and start date

Points to Consider

When reviewing the evidence, advisers should consider whether the declared income and employment details are reasonable and supported by the customer's circumstances.

Questions to ask and consider:

Does the declared role and income align with the employer profile?

Does the customer work for a family business?

If this is a new role, is it consistent with the customer's experience and employment history?

Does a significant increase in income appear reasonable based on the customer's employment history and experience?

Has the customer been in their current employment for a short period prior to application, we would consider a short period to be six months or less?

Is the new employer a small business or difficult to independently verify?

Definition

Seafarers are individuals who work on seagoing vessels, such as cruise ships or oil rigs.

They may be permanently employed or work as contractors. Contractor seafarers are typically responsible for managing their own tax affairs, including customers who consider themselves tax exempt.

Paid in Sterling Income

Where a seafarer income is received in Sterling (GBP), follow the standard contractor, employed or self-employed policy, as appropriate.

Non-Sterling Income

Where a seafarer is paid in a non-sterling currency, they must be treated as an employed contractor, regardless of:

• Who pays the tax
• Whether tax is deducted
• Whether the customer considers themselves self-employed

Minimum Income Requirements (Non-Sterling Income Only)

For seafarers paid in a non-sterling currency, the customer must earn the equivalent of:

• More than £500 per day or
• More than £75,000 per annum

The equivalent amounts for accepted non-sterling currencies are:

Where income is below these amounts, the income cannot be used.

Employment Requirements

The customer must have either:

• At least 12 months' continuous employment with a minimum of 6 months remaining on their current contract; or
• At least 2 years' continuous service in the same type of employment.

Applications That Cannot Be Considered

Where the customer does not meet the employed contractor requirements or the relevant minimum income threshold, the application cannot be considered.

This is because the income would need to be treated as self-employed non-sterling income, which is not currently acceptable.

Applications from customers employed on a zero-hours contract may be considered where:

• They have at least 12 months' continuous employment on a zero-hours contract.
• Continuous employment can include zero-hours contracts with different employers in the same type of work.

The customer's employment status must be keyed as 'Zero Hours Contract'.

Where different types of income are evidenced, these must be keyed separately, for example:

• Basic pay
• Overtime
• Commission
• Bonus

Income Assessment

The total income received during the latest 12 months must be keyed and will be used in the affordability assessment.

Evidence Requirements

Documentary evidence covering the latest 12 months of earnings must be obtained. This may be:

• Payslips covering the full 12-month period; or
• A P60 dated within the last 12 months, plus subsequent payslips covering the remaining period required to evidence 12 months' income.

Where any period within the latest 12 months shows no income, this should be included in the annual income calculation as zero income where you are satisfied:

• The reason for the gap is reasonable and evidenced where appropriate; and
• The customer's income remains sustainable.

Nursing Bank Income

Where the customer is employed by the NHS or a private healthcare provider and receives income through a Nursing Bank, refer to the Nursing Bank criteria for full requirements.

Nursing Bank Income

Nursing Bank income can be considered where the customer receives income through an NHS Trust, private healthcare provider, or a third-party provider of Nursing Bank services.

Where Nursing Bank Is the Customer's Main Income

Where Nursing Bank income is the customer's main source of income:

• Key the employment as a full job profile.
• Key the income under the Basic Income field.
• Obtain payslips covering the latest 4 consecutive weeks.

Where Nursing Bank Is Additional Income

Where the customer receives Nursing Bank income in addition to their main employment:

• Key the main employment under the appropriate employment type.
• Key the Nursing Bank income under the Nursing Bank income field.
• Obtain payslips covering the latest 12 consecutive weeks.

Overview

The preferred evidence for self-employed income is:

1. Tax Calculations and corresponding Tax Year Overviews.
2. Finalised Business Accounts (where Tax Calculations and Tax Year Overviews are not available).

Additional information may be requested to support an application.

Where requested by the system, the latest three months' business bank statements must also be provided.

Tax Calculations and Tax Year Overviews

Acceptable Documents

Provide the latest two years of:

• HMRC Tax Calculations; and
• Corresponding Tax Year Overviews.

Tax Calculations must relate to the same tax years as the Tax Year Overviews.

The customer's name must be visible on both documents.

Tax Calculations can be obtained through the customer's HMRC online account.

Tax Year Requirements

The latest tax year submitted must:

• Be the latest available tax year at the date of application.
• Be no more than 18 months old at application.

For applications submitted from 6 October each year, the latest available tax year must be provided.

Example

Applications submitted from 6 October 2025 must include documentation for tax year 2024/25.

Tax Calculation Requirements

HMRC Tax Calculations must show:

• HMRC logo.
• Unique Taxpayer Reference (UTR).
• Customer's name.
• Tax year.
• "This is a copy of information held on your official online SA tax account with HMRC".
• "Submission is 100% complete".

Accountant-Produced Tax Calculations

Tax Calculations produced using accountants' commercial software are acceptable when accompanied by corresponding Tax Year Overviews.

The documents must show:

• Unique Taxpayer Reference (UTR).
• Customer's name.
• Tax year.

Tax Figure Differences

The tax due figure shown on the Tax Calculation and Tax Year Overview will normally match.

Where differences exist, the documents may still be acceptable. Additional documentation may be requested if required.

Business Accounts

Acceptable Accounts

Finalised business accounts are acceptable.

Accounts must clearly show:

• Net profit for Sole Traders.
• Share of net profit for Partnerships.
• Profit share for LLP members.
• Salary and dividends for Limited Company Directors.

Less Than Two Years Trading

Where the customer has traded for less than two years but has completed at least one full year of trading (this does not need to be a full tax year), refer to the 1-Year Self-Employed Criteria.

Business Bank Statements

Where requested, provide business bank statements covering the latest three full months.

Statements are required even where no income is visible during the period.

Student Loan Adjustments

HMRC may make informal adjustments where Student Loan repayments have been paid directly to the Student Loan Company. In these cases, the adjustment may appear on the Tax Calculation but not on the Tax Year Overview.

Documents are acceptable where the difference between the Tax Calculation and Tax Year Overview matches the Student Loan repayment amount shown on the Tax Calculation.